Federated Hermes (FHI)

Management Discussion

• For an explanation of changes for 2020 as compared to 2019, see Federated Hermes' Annual Report on Form 10-K for the year ended December 31, 2020, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations.
• Revenue. Revenue decreased $147.8 million in 2021 as compared to 2020 primarily due to an increase of $307.3 million in Voluntary Yield-related Fee Waivers (see Business Developments - Low Short-Term Interest Rates for additional information, including the impact to expense and the net pre-tax impact) and a decrease in money market revenue of $38.1 million primarily due to lower average money market assets. These decreases were partially offset by an increase in equity and fixed-income revenue of $127.6 million and $46.6 million, respectively, due to higher average assets, an increase of $11.0 million as a result of the consolidation of certain variable interest entities (VIE) not previously consolidated prior to 2021 related to the HCL Acquisition (see Note (2) to the Consolidated Financial Statements) and an increase in alternative/private market revenue of $7.3 million due to the revenue of a previously nonconsolidated entity being recorded to operating revenue beginning in March 2020.
• Federated Hermes' ratio of revenue to average managed assets for 2021 was 0.20% as compared to 0.23% for 2020. The decrease in the rate was primarily due to the reduction of revenue from higher Voluntary Yield-related Fee Waivers, partially offset by a higher proportion of revenue earned on average equity assets during 2021 as compared to 2020.